Khama leaves Public Enterprises bleeding

Publishing Date : 27 February, 2018

Author : ALFRED MASOKOLA

President Lt Gen Dr Ian Khama will leave in his trail at the end of his term in March, scores of public enterprising battling sustainability, ironically some which were profit making entities prior to his presidency.

The Botswana Meat Commission (BMC); Water Utilities Corporation (WUC), and Botswana Corporation (BPC) are among vital public enterprises that have been experiencing perennial losses for the past decade. In 2006, WUC, BMC and BPC made a combined net profit of P371.9 million while, in the latest budget speech, the three entities recorded a worrisome combined loss of P507. 5 million.

The average net profit ratio, which is profit after tax as a percentage of gross sales, of the twelve commercial public enterprises was 21 percent during the 2008 budget speech. The financial performance of the entities ranged from a net loss of P3.5 million, for the Botswana Agricultural Marketing Board (BAMB), to a net profit of P714.8 million, recorded by the Botswana Development Corporation (BDC) during that year.

The Dead alive Botswana Meat Commission

BMC which recorded a P34 million profit in 2006, stumbled along the way, with corruption and maladministration being detected. In this week’s Budget Speech, Kenneth Matambo revealed that BMC has again made a net loss of P229.7 loss, this is despite the fact that in 2015 government injected P600 million to help resuscitate the drowning government entity.

BMC which enjoys monopoly as the sole exporter of beef in Botswana has gone from a profit making entity to a massive lost making corporation in the last seven years with a total losses amounting to over a P1 billion. In 2013, parliament agreed to set-up a Parliamentary Select Committee to investigate the BMC owing to scandals, poor performances and other excesses that bedevilling the organisation.

The Committee had found that BMC CEOs, with few exceptions, have been chosen from the ranks of retired civil servants not based on merit or their commercial experience. The MPs had also pointed out that the BMC management practiced poor governance and there were bad relations between the board and management. It discovered productions inefficiencies caused by over staffing, declining productivity, and high marketing costs. There was no proper and efficient system of financial controls. The BMC became financially insolvent over the 2009-2012 period.

The Parliamentary Select Committee at the time picked on the issue of BMC marketing, pointing out that “At present BMC’s marketing agent, Global Protein Solutions (GPS) provides for a legal monopoly on exports. The BMC should seek to revise the contract and segments of the global beef export market to hedge against a monopoly of the marketing of the Botswana beef produce.”

Interestingly the Committee also declared that an investigation be undertaken by the Directorate on Corruption and economic Crime (DCEC) into the award of the marketing contract by BMC in favour of GPS and consideration be made for a review and renegotiation of the contract terms to ensure residual contract of the beef export marketing by the BMC. The Committee also discovered a “strong circumstantial evidence of under-pricing of beef to the EU, South Africa, and domestic markets over the period. The recommendations by the committee were never considered. The Parliamentary Select Committee also decided that Feedlot activities should be undertaken by the Botswana private sector and not by the BMC.

The Debt riddled Water Utilities Corporation

The WUC was established in 1970 initially to manage a water supply and distribution in the cities of Gaborone and Francistown and the towns of Lobatse, Jwaneng, Selebi-Phikwe and Sowa. Since formation, WUC has been economically self-sufficient, raising enough revenue from billing and subsidies to cover operational costs.

Over the years, there have been several water suppliers in Botswana. WUC has been supplying only towns and cities, but also supplied the Department of Water Affairs and District Councils with bulk water for further distribution to the remaining areas in the country.

However, in 2009, a year after Khama become president, Ministry of Minerals, Energy and Water Resources started implementing the Water Sector Reforms which saw water supplies being transferred from Water Affairs, which was under the authority of councils to Water Utilities Corporation.

The Water Sector Reforms Project (WSRP) was aimed at streamlining this somewhat cumbersome arrangement and therefore to improve water supply service delivery. The National Water Master Plan Review (NWMPR) of 2005-2006 recommended a major restructuring of the water sector which includes, amongst others, the separation of water resources management from water service delivery.

Following this, the Government engaged the World Bank to work with the Ministry of Minerals, Energy and Water Resources to rationalize the water sector. It was from this study that the Water Utilities Corporation was expected to take over all water and wastewater service delivery in the country.

Evers since the takeover, Water Utilities has been experiencing financial problems, and at times looked to government for rescue, in 2012, the corporation made a staggering P541 million loss, followed by p191 million the following year. This week, Matambo announced in the budget speech that Water Utilities made P137.6 loss in 2017.

Matambo has contended however, that Water Utilities as well as another perennial loss making Utility Corporation, BPC are encountering financial quagmire as a result of misalignment between the levels of tariffs charged relative to their mandates.
“To address this, the current water tariffs charged by Water Utilities are gradually being aligned with water treatment and distribution expenses,” he said. Water Utilities have seen Godfrey Mudanga who presided over the period of loss making, leaving the organisation. He has since been replaced by a determined Mmetla Masire.

The cash strapped Botswana Power Corporation

In 2006, BPC registered a net profit of P162 million, followed by another profit of P121. million in 2007. Fast forward to 2017, BCP no longer a profit making entity with a loss of 140.2 million. In 2016, BPC loss stood at P99.6 million. Among the worst losses incurred by the troubled utility giant was a net loss of P1.3 billion in 2013, having recorded another loss of P1.1 billion the previous year. As the norm the continued losses have been blamed on power generation, transmission and distribution expenses.

The Minister has again hinted that BPC tariffs will be reviewed in order to meet the corporation’s operational costs. One of the lowest scandals was the failure of Morupule B, following the defect that marred the power station after its completion. Morupule B, was financed by government and World Bank at the tune of P11 billion. Government is currently considering selling the plant to Chinese state owned company China National Electric Equipment Corporation (CNEEC), which was the constructor of the plant.

The fading National Development Bank

Another entity which has experienced losses in recent years is the National Development Bank (NDB). Under the tutelage of Lorato Morapedi, which has been considered for commercialisation, has not been having a good balance sheet in the last three years. In 2008, NDB increased its profit by P11 million from the previous year to P33.6 million.

Last year, owing to recent troubles, NDB made another loss of P168.2 million, a development which would likely disturb its commercialisation plan as well as its ambition to become a commercial bank. In 2016, NDB requested government to inject capital amounting to about P1 billion in the next three years in order to transform the bank and prepare it for commercialisation.

Chief Executive Officer of the Bank, Morapedi wanted government to inject P400 million in the next financial year, followed by two governments guaranteed loans of P165 million and P250 million in subsequent years, of which it was granted. NDB was established under an act of parliament in 1963 with its main objective lying in providing a varied range of financial services to Botswana’s business sector and the public at large while aiming to earn satisfactory returns on shareholder’s funds.

As a Development Financial Institution (DFI), NDB is expected to be viable and self-sustaining and also to contribute immensely to the growth of the local economy. Other parastatal that has continued to make losses is Air Botswana. Over the past 15 years Air Botswana has sparingly made profits, while the recent years have been marred by losses and issues of maladministration.